If you have your own SMSF you are both a member and a trustee (either individually or as a director of the trustee company).
In this instance your Personal Legal Representative (PLR)takes your place as trustee alongside the surviving trustee.
If you have a Will, this will be your executor.(usually your spouse if you are married).
The executor must be formally appointed as trustee and will in most cases resign when the deceased’s account is finalised.
1. The Company’s Constitution (Memo & Articles) to see if in fact 2 directors are required (modern companies only require 1) and
2. The super fund’s trust deed to see what the procedures are for appointing a trustee in the event of the death of one of the members.
In the normal scheme of things, the executor of your Will, will take on the directorship and handle matters accordingly. This will be no issue if there is a surviving spouse who is also a director of the trustee company and is the beneficiary.
But what if:
1. The company requires 2 directors, and the spouse is the executor?He or she can’t fill a directors role twice and so you are short one director or
2. The spouse is not the first spouse of the deceased and there are children from earlier marriages to consider. Remember that the law charges the trustee with absolute discretion as to how super funds are distributed at the death of a member and the funds can go to related parties such as spouse, children, parents, grandchildren etc.UNLESS there is a properly executed Binding Death Benefit Nomination.
It is also possible in this circumstance for the surviving spouse to block your PLR from becoming a director if the trust deed is deficient in this area.
So you should
1. Check the company’s Constitution so that it will work with your situation i.e. requiring 1 or 2 directors and
2. Check your trust deed for the rules in relation to the death of a trustee and
3. Ensure you have properly executed Binding Death Benefit Nominations where applicable.
This article was featured in our July 2015 newsletter